Mideast Stocks Sink as Brent Crude Trades Near Lowest Since 2009

  • Qatari index leads declines as Dubai's drops to 2-year low
  • Gauge of biggest GCC companies in worst drop since August

Middle Eastern stocks were among the world’s biggest decliners after OPEC’s failure to limit output amid a global supply glut pushed the commodity to the lowest level in almost seven years this week.

Qatar’s QE Index slid 3.1 percent, the most among 93 stock indexes tracked by Bloomberg globally after equities in Athens, to 10,096.51. Dubai’s DFM General Index followed with a 3 percent slide. The Bloomberg GCC 200 Index, a gauge of the largest companies in the six-nation Gulf Cooperation Council, had its worst day since August.

Stocks in Qatar (yellow) and Dubai (green) sink with the price of Brent crude (red).
Stocks in Qatar (yellow) and Dubai (green) sink with the price of Brent crude (red).
Bloomberg

The declines underscore growing pressure on financial markets across the Middle East, in particular the GCC. The Organization of Petroleum Exporting Countries’ decision to keep flooding the market with oil in the face of declining prices has spooked investors already concerned by the region’s geopolitical risk. Oil is the main source of government income and spending in the GCC.

“The significant selloff in oil last night bruises sentiment further," Akber Khan, the director of asset management at Al Rayan Investment, which manages more than $900 million across equities and fixed-income, said by phone from Doha. “In a relatively light liquidity environment, the effective negative news flow exacerbates the decline."

Brent crude dropped 0.5 percent to $40.53 per barrel on Tuesday at 12:46 p.m. in London, the lowest level since February 2009 on a closing basis. The lack of any limit on OPEC may lift the lid on millions more barrels of additional supply in 2016 from countries including Iran, which is seeking to reclaim market share when sanctions are lifted. Oil stockpiles have already swollen to a record 3 billion barrels, according to the International Energy Agency.

GCC Sinks

The GCC is home to about 30 percent of the world’s proven oil reserves. Dubai’s DFM General Index dropped to the lowest level in two years as 214 million shares traded, about half the 12-month full daily average. Abu Dhabi’s ADX General Index lost 2.4 percent.

The Tadawul All Share Index in Saudi Arabia, home to the lion’s share of the region’s oil, fell 2.5 percent. Al Rajhi Bank, which has the largest weighting on the gauge, was the biggest contributor to the decline, losing 2.4 percent to the lowest since April 2009.

Kuwait’s and Bahrain’s gauges decreased 0.5 percent and 1.1 percent, respectively. Oman’s MSM 30 Index retreated 1.2 percent. Egypt’s EGX 30 Index lost 2.5 percent and Israel’s TA-25 Index slumped 0.8 percent.

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